HEG shares hit 52-week low as FIIs reduce stake; tank 51% in 2019

The stock hit a 52-week low of Rs 1,839, down 5 per cent on Tuesday. It has fallen 9 per cent in the past two days on the BSE.

Shares of HEG hit a 52-week low of Rs 1,839, down 5 per cent on Tuesday as institutional investors reduced their stake in the company in the March quarter. The stock has fallen 9 per cent in past two days.

Institutional investors' stake in the company has declined by more than 3 percentage points at 15.29 per cent in January-March quarter, the graphite electrode manufacturer said in a statement on Thursday. They held 18.57 per cent stake in HEG at the end of December 2018 quarter. 

According to shareholding pattern filed by HEG, foreign institutional investors (FIIs) reduced their holdings by 2.25 percentage points to 5.75 per cent in March quarter from 8 per cent in December quarter. Stake of mutual funds, too, declined by 106 basis points to 0.15 per cent from 1.21 per cent in previous quarter.

Institutional investors had tendered part of their holding in the company’s recently concluded share buyback offer which closed on March 22, 2019.

Individual shareholders' holding in HEG, however, increased by 3.03 percentage points to 16.1 per cent in March quarter from 13.07 per cent at the end of December quarter. They bought an additional 9,89,062 shares during the quarter, data provided by the company showed.

Thus far in the calendar year 2019, the stock of HEG has tanked 51 per cent from level of Rs 3,720 on December 31, 2018. The stock hit an all-time high of Rs 4,950 on October 16, last year in intra-day trade. In comparison, the benchmark S&P BSE Sensex was up 7 per cent so far in the current calendar year.

Graphite electrodes are used in the EAF route of steel-making. Recently, the slowing down of the Chinese economy together with oversupply of Chinese steel has resulted in an ongoing correction of steel prices. This has had an adverse effect on graphite electrodes realisation. Graphite electrode prices have softened due to a combination of factors like weak global steel prices and increased lower grade Chinese graphite electrodes imports into India (of non-UHP grade).

"While HEG reported a healthy 9MFY19 on the back of favourable realisations and relatively subdued operating costs, we expect operating profit margins to decline from supernormal levels of 73.8 per cent in 9MFY19 to around 41 per cent in FY20," analysts at ICICI Securities said, adding, "This is on account of a steep rise in price of key raw material (needle coke) and the fall witnessed in price of graphite electrodes in both UHP grade (on account of recent weakness in steel prices) and HP grade (on account of removal of anti-dumping duty from China) electrodes."